Business & Finance Stocks-Mutual-Funds

Definition of Restricted or Control Stocks


    • The Securities and Exchange Commission (SEC) oversees restricted stock, also known as controlled stock, as part of the Securities Act of 1933. In order to sell restricted stock, the owner must register or be granted exemption by the SEC. The SEC operates under direction of the Internal Revenue Code Section 1244.


    • Placing a restriction on stock awarded to insiders of a company helps protect stakeholders from adverse effects of premature sales made by company insiders. It helps to ensure proper market-driven buying and selling of shares.


    • According to Investopedia, restricted stock is awarded to insiders following "merger and acquisition activity, underwriting activity, and affiliate ownership". This ensures that insiders with access to shares as a result of involvement with the company fall under restricted rules.

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